Download Peso`s debacle? - Trinity University

San Antonio Business
and Economics Society
The Mexican Economy
Investment Grade or Peso Bubble?
Jorge G. Gonzalez
Trinity University
The events of 2001
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Economic slowdown in U.S.
Mexican government gridlock
Great relations with U.S.
Decline in the price of oil
September 11th
Crisis in Argentina
Yes to the World Cup!
Mexico’s Reaction
• ¿Peso’s debacle?
Exchange Rate
Pesos per U.S. Dollar
11
10
9
8
7
6
5
4
Jan95
Jan96
Jan97
Jan98
Jan99
Jan00
Jan01
Jan02
Source: Banco de México
www.banxico.org.mx
Exchange Rate
Pesos per U.S. Dollar
11
10
9
8
7
6
5
4
Jan95
Jan96
Jan97
Jan98
Jan99
Jan00
Jan01
Jan02
Source: Banco de México
www.banxico.org.mx
Mexico’s Reaction
• Peso’s debacle?
• Capital flight?
Foreign Direct Investment
Billions of Dollars
24.7
25.0
20.0
12.8
15.0
11.0
2000
1998
1996
4.8 4.4 4.4
1994
0.0
1990
5.0
2.6
1992
10.0
9.5 9.2
12.5
11.9
14.2
Source: Banco de México
www.banxico.org.mx
Mexico’s Reaction
• Peso’s debacle?
• Capital flight?
• Economic crisis?
Real GDP
% Change
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
5.2
4.4
6.8
6.6
5.0
3.6
-0.3
-6.2
1994 1995 1996 1997 1998 1999 2000 2001
Source: Banco de México
www.banxico.org.mx
Mexico’s Reaction
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Peso’s debacle?
Capital flight?
Economic crisis?
Fiscal crisis?
Government Balance
Balance / GDP
1.0
0.5
0.2
0.0
0.0
0.0
-0.5
-0.7
-1.0
-0.7
-1.2
-1.5
-1.1
-1.1
-2.0
1994
1995
1996
1997
1998
1999
2000
2001
Source: SHCP
www.shcp.gob.mx
Mexico’s Reaction
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Peso’s debacle?
Capital flight?
Economic crisis?
Fiscal crisis?
Inflationary spiral?
Inflation
60.00
51.97
50.00
40.00
27.70
30.00
20.00
10.00
0.00
7.05
15.7218.61 12.32
8.96
4.40
1994 1995 1996 1997 1998 1999 2000 2001
Source: Banco de México
www.banxico.org.mx
Bumps in the road?
• Super Peso
Inflation Differential vs.
Exchange Rate
400
300
Inflation
200
100
0
1995 1997
Exchange Rate
1999
2001
295
188
Source: Banco de México
www.banxico.org.mx
International Trade
Billions of Dollars
50
40
30
Exports
20
01 - I
00 - I
99 - I
97 - I
96 - I
98 - I
Source: Banco de México
www.banxico.org.mx
95 - I
94 - I
10
Imports
¿Piedras en el camino?
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Super Peso
U.S. economy
Political gridlock
Income Inequality and Poverty
San Antonio Business
and Economics Society
The Mexican Economy
Investment Grade or Peso Bubble?
Jorge G. Gonzalez
Trinity University
San Antonio Business
and Economics Society
The Mexican Economy
Investment Grade or Peso Bubble?
www.trinity.edu/jgonzal1
Jorge G. Gonzalez
Trinity University